Fleet Management News & Business Info | Commercial Carrier Journal
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very good. "More recently, the economy is doing better than what everyone thought, but everyone is bearish." The United States has seen 1.5 to 2 percent GDP growth despite all the shocks – Europe, high energy prices, fears of a slowing Asia and riots in the Middle East. "The big thing is the economy," says Eric Starks, president of transportation forecasting firm FTR Associ- ates. "If the economy doesn't behave, nothing else falls into place. " FTR anticipates Gross Domestic Product growth of 2.4 percent – about half of what normally would be de- sired in a recovery. But much of the lagging growth is in the service sector, which is of less concern to trucking, Starks notes. So the 2.4 percent GDP growth translates into an FTR forecast of 2.6 percent growth in freight in 2012. There is some potential for higher GDP growth if the recent bump in housing construction continues, but most of the risks are on the downside, Starks says. The big issue is Europe, he says, adding that it appears the European debt crisis will be contained. "A lot of indicators we're looking at suggest that we averted a recession." Starks is not alone in pre- dicting a close call. "I still think that the U.S. economy will skirt by another recession," says Bob Costello, chief economist for the American Trucking Asso- ciations. He believes that the U.S. economy will still grow, but at a slow pace. "Reces- sion risk is still high because of eurozone problems." The worst-case scenario is that the Euro collapses, leading to financial collapse in Europe to which there is U.S. bank exposure and a subsequent credit crunch here. "Any sort of major thing like this would lead to a recession." But this nightmare sce- nario wouldn't seem that bad given the already weak U.S. economy, Costello says. "Even if there is a recession, it will be like falling off a curb, not a cliff." The political environment also remains a big cloud, although two threats could be resolved by the time you read this. One is the extension of the 2 percent payroll tax holiday. Another is extension of unemployment benefits. If those aren't extended, that takes 1 percent off of GDP, says Costello. In both those cases, government action won't stimulate the economy, but government inaction could stifle it. Employment is another big factor. "The fastest way to improve GDP is to get people back to work, " notes Donald Broughton, transportation analyst for Avondale Part- ners. A 1 percent drop in the unemployment rate is worth a 2 percent growth in GDP, he says. Costello expects the U.S. economy to generate about 96,000 jobs a month on aver- age in 2012 – positive, but not enough to move the unem- ployment rate much. He cau- tions, however, not to focus too much on the unemploy- ment rate because it is more important for trucking that the economy adds jobs. There is at least a mild upside to slow job growth, BIGGEST CHALLENGE IN 2012? 1. DRIVER AVAILABILITY 2. FREIGHT PRICING 3. REGULATION 4. POLITICAL CLIMATE 5. FREIGHT VOLUME 6. FUEL COSTS 7. OTHER Costello argues. "Corporate America has a lot of money, which is being spent on capital rather than labor. " He thinks businesses will continue this practice in 2012, and that translates into higher indus- trial production, which is good for trucking. (See "Building a recovery, " page 53.) Not enough capacity Analysts can debate the strength of the overall economy or all the inputs that go into defining freight vol- ume, but all seem to agree that barring a double-dip recession in 2012, demand probably will outpace the supply of trucks and drivers. Trucking companies are adding a small amount of capacity, but it's hard to find qualified drivers. "The big issue is going to be capacity," says Starks. FTR sees slight growth in capacity but 9% 8% 5% 3% 3% 4% IN THE MONTHLY MARKETPULSE SURVEY CONDUCTED BY RANDALL-REILLY AND CCJ, 57 PERCENT OF CARRIERS SAY THAT DRIVER AVAILABILITY IS THEIR TOP CONCERN NOW, AND TWO-THIRDS BELIEVE IT WILL BE THEIR BIGGEST CHALLENGE IN 2012. RANDALL-REILLY MARKETPULSE REPORT, NOVEMBER 2011 COMMERCIAL CARRIER JOURNAL | JANUARY 2012 51 67%